Now, I haven’t written an article about how much contracts bother clients.

That’s because they don’t bother good clients.

Good clients know that contracts protect them just as much as they protect you.

And that they let each of you know exactly what is expected of you.

But if a client is bothered by a contract, that’s a client you don’t want to work with. And you should run.

2. Separate business entities aren’t necessary

Huh?!?

Okay, so I haven’t written about business entities on Legal Ed for Freelancers yet.

But that was actually the subject of an article I was working on when this book made me stop in my tracks.

So it’s coming.

And, needless to say, I respectfully disagree again.

The author tells his readers that separate business entities are unnecessary because it’s not likely that freelancers in his industry will get sued.

He also tells his readers that setting up and maintaining a business organization can be a “pain in the ___.”

First, it doesn’t matter whether you’re likely to get sued.

You could get sued.

And you need that separate entity to keep all of your personal assets separate from your business assets.

That way, if you ever do get sued, and you’ve followed the requirements for the business entity (again, we’ll get to this in a future post), you won’t have to worry about a creditor of your business going after your personal assets.

And that will give you peace of mind.

Second, setting up a simple business entity isn’t complicated.

For most freelancers, a single member Limited Liability Company (”LLC”) is all they need.

The requirements may be different in your jurisdiction, but in Florida, setting up a single member LLC is easy and inexpensive.

And going forward, all you have to do to keep the entity active is follow the requirements for an LLC, file a simple annual report online, and pay the annual fee.

Moreover, in addition to the legal protections and peace of mind, running your freelance business through a separate business entity also gives you more credibility with your clients.

And this is a big deal especially if you are a new freelancer.

HOW TO KNOW WHEN YOU ARE GETTING BAD ADVICE

Okay, so we know that this was bad advice. But how can you spot it in the future?

Sometimes you’ll have no clue.

You’ll read a book or listen to a presentation or podcast and the bad advice will hit your eyes or ears, and you won’t see it for what it is.

And the reason for that is because the person has authority and is an influencer.

In other words, they’re the real deal.

They’ve done something amazing, produced some excellent content, or have grown their business to six or seven figures.

So you should listen to them.

But don’t listen if that person is giving legal or tax advice.

That is unless they have an accounting or law degree, and have experience helping freelancers and other small business owners.

Because many times, if not most of the time, it will probably be bad advice.

And because they aren’t a lawyer or accountant, you won’t know whether the advice is accurate or not.

They may swear by their advice because it worked for them.

But that doesn’t mean it will work for you.

And it can cause big problems for your business.

Like opening you up to personal liability because you didn’t form a business entity.

Not the latest (lame) horror movie. Or a recently booked speaking engagement.

It was . . . a contract.

Maybe a client presented one to you and expected you to read and understand it because “it’s just a standard agreement.”

Or a client asked you to “email me a contract and I’ll review it.” But you don’t have a contract prepared.

Or, maybe you just avoided the subject. You know you shouldn’t begin work without a contract, but you did because you couldn’t stand to look at one more “legal” term or phrase such as “witnesseth” or “comes now”.

THE FEAR IS NORMAL

I get it. And so do your fellow freelancers.

It’s normal to fear something that’s unfamiliar, or that makes you uncomfortable.

But it’s possible to conquer the fear.

Easy for me to say, right? I’m a lawyer. I don’t fear contracts.

But even lawyers get scared.

Sometimes I see an 80-page behemoth and my blood runs cold.

How am I going to get through this thing?

What if I miss a critical word in paragraph 14, line two, on page 53?

Is that period in the right place?

I thought this was a lease, but it’s a sub-lease? NOOOOOOOOOOOOOOO!!!!!

The truth is, we all get intimidated from time-to-time. And anyone who tells they don’t is either lying, or their enormous ego won’t let them admit it.

But you can conquer your fear so that you don’t hear the theme from the movie Halloween (the original, not the remake, of course) when the client gives you a contract.

Or when that voice in your head says, “oooooo, it’s time to discuss contracts, oooooooo!”

And here’s how to do it.

6 WAYS TO CONQUER YOUR FEAR

1. Realize That Contracts are Your Friends

You need contracts. And so do your clients.

Contracts guide and protect you.

Contracts explain exactly what you and your client must do.

They also limit the scope of work you must do, make sure you get paid and help you collect if the client tries to stiff you.

And if you work without one, it’s your word against the client’s if something goes wrong. And that can result in not getting paid.

So the next time you think about working without a contract, don’t. Because working without a contract is scarier than dealing with one up front.

2. Educate Yourself

Legal issues or concepts become less scary when you educate yourself.

Knowledge is power. And with that power, you can kick your fear to the curb.

There are resources to help you understand contracts, including numerous books written specifically for non-lawyers. Not to mention websites that focus on educating non-lawyers about contracts and other legal issues (hint, hint).

You can find such books at the library, and you should probably subscribe to this website. I’m just sayin’.

And there’s no time to start your educational journey like the present.

So, as a special bonus to add some knowledge to your arsenal of fear eliminating weapons, let’s discuss the minimum requirements for a contract.

First, you need an offer.

The offer is simple to understand: one party makes an offer to another party.

For example, you may offer to write an article for a client that you will deliver in two weeks for $500.00.

Easy.

Next, you need an acceptance of that specific offer.

So if the client says, I accept your offer to write an article for me to be delivered in two weeks for $500.00, you have an acceptance.

However, do you have an acceptance if the client says, I accept your offer to write two articles for me to be delivered in one week for $500.00?

No.

That is a counteroffer. And you can accept the counteroffer, reject the counteroffer or make a new counteroffer.

Easy. Right?

Now let’s complicate things.

Okay, not really. But the third element of a contract makes people a little nervous.

And they get nervous because it involves one of those pesky legal terms.

So get ready. And don’t scream and run out of the room.

Here it is . . .

Consideration.

Actually, that’s not so scary, is it?

And, like offer and acceptance, consideration is EASY.

Because consideration is simply what one party gives to the other party.

Can you identify the consideration in the offer and acceptance described above?

Go ahead and try. I’ll give you a couple of moments.

. . . Jeopardy theme music plays . . .

Okay, I bet you got it. But just to make sure, I’ll reveal the answer.

The consideration you give the client is the article you will write in two weeks.

Easy.

And the consideration the client gives you is the $500.00 for writing the article and delivering it in two weeks.

Easy.

And guess what?

Now you know the basics of a legally binding contract.

I bet they don’t seem so scary anymore, do they?

And now that you have the basics down, you should educate yourself further. Especially with respect to issues that directly affect your type of freelancing work.

So get out there and read, talk to a lawyer or visit a website that helps freelancers understand legal issues (hint, hint).

3. Don’t Over-Complicate Things

Remember that 80-page behemoth?

Unless you’re dealing with mergers and acquisitions, securities issues, or complicated business deals or leases, most contracts won’t be that voluminous or intimidating.

In fact, many times simple contracts are best. Especially when you’re freelancing.

That said, sometimes contracts need to be more detailed.

Such as when you need confidentiality or non-compete provisions. And these provisions can cause your page count to balloon.

They’ll also increase the chances that you’ll have to read legal terms that you thought were extinct.

And if your contract needs complicated provisions, a lawyer should review it (see #6 below).

The good news is, if you have a form contract that includes such provisions, you probably need a lawyer to review it once.

Then, you can use it again and again and just change some of the basic provisions (such as the client’s information, the scope of work, etc.) to fit your needs.

So remember. Complexity isn’t always better.

So don’t make your contracts more complicated than needed.

But if you need a complicated contract, have a lawyer review it (again, see #6 below).

4. Nip Any Issues in the Bud

If a client gives you a contract and it contains terms you don’t understand or don’t agree with.

Or if the client makes revisions to a contract you or your lawyer prepared, and you don’t agree with them.

Or if there is anything that just doesn’t feel right about a contract.

Don’t let it slide.

Talk to the client.

Most times, a simple conversation will resolve the disagreement or confusion.

And dealing with the issues up front is vital. Because if you don’t, they’ll bite you in the end.

So, have this conversation before the contract is signed.

And when you do, make sure the client understands that you want to ensure that you are both protected and the project goes smoothly.

If you bring this to the client’s attention up front, and explain it in that way, the client should respect you for addressing the issue.

But if the client doesn’t handle it well.

Or if the client refuses to remove or revise a provision that’s clearly unfair to you.

Walk. Away.

That may create some new (and different) fears, especially if you are just starting out.

But, 9 times out of 10, a client who is unreasonable with the terms of your agreement, and won’t compromise with you on a provision that is clearly unfair to you, is a client that you don’t want to work with.

They will likely turn into the client from hell. And you don’t want to work with clients from hell if you want to get paid.

5. Prepare a Form Contract in Advance

You should have your own contract ready to go in case you are asked for one.

Not only will you have it ready for the client, but the process of putting your own contract together, with a lawyer if needed, will help you to understand contracts.

Which will enable you to conquer your fear.

And remember, don’t make your contract complicated unless it must be complicated.

Just make sure it contains an offer, an acceptance, and consideration.

And include provisions for getting paid, scope of work, attorney’s fees and any other provisions that are appropriate.

And how will you know which provisions to include?

See #3 above.

You need to educate yourself.

And if you’re still unsure . . .

6. Have a Lawyer Review Your Contracts

A lawyer should review your contracts.

But some people can’t afford it.

Or they think they can’t afford it.

But, you’d be surprised at some of the available low-cost options.

These include online legal providers such as LegalZoom and Rocket Lawyer. But these can be hit and miss.

I’ve had clients who’ve prepared documents with online legal service providers ask me to review those documents, and they don’t do what the client thought they would do.

So be careful.

Plus, you’ll probably be able to find a lawyer to review a contract at a relatively cost effective price.

I review contracts for freelancers and other small business owners at an affordable flat rate.

So, if you do all the above, and you still don’t feel comfortable, then you should have a lawyer review the contract.

And, even if you do feel comfortable, it’s still a good idea to have a lawyer review it.

And it probably won’t cost as much as you think. But you may need to shop around a little.

NOW GET OUT THERE AND CONTRACT!

Remember, you are not alone.

Everyone gets intimidated by contracts from time to time, including lawyers.

You can get rid of this fear by preparing and educating yourself as outlined above.

And, if you still need help, you should be able to find a lawyer who can help you review a contract for a one-time fee.

You already know that you must have a signed contract before you begin work. But what should that contract say?

Since we’re in our Getting Paid series, we’ll discuss four provisions that you must include in your contracts to ensure that you get paid. And one of these provisions will even allow you to engage an attorney without worrying about cost in case you need help collecting from a soon-to-be-former bad client.

These provisions may help with other issues as well, and there are, as you might guess, other contractual provisions that don’t necessarily relate to getting paid. We’ll discuss those in a future article.

For now, here are the four provisions that will ensure that you get paid.

Compensation. Okay, a little obvious, right? But there is more to this provision than just how much you get paid. You also need to include a retainer, late fees and kill fees.

As you know, I’m a proponent of the Replenishing Retainer. Use it, and you will waive bye-bye to your cash flow problems. Don’t use it, and you’ll be chasing clients for your money. It’s that simple.

In addition, your compensation provision must include late fees in case a client fails to pay on time, and “kill fees” if the client cancels the project after you’ve begun work.

A late fee is straightforward. If the client doesn’t pay on time, an additional fee is tacked on to the outstanding amount due.

A kill fee kicks in when a client “kills” a project after you start working on it. You’re entitled to compensation for the time you spent on the “killed” project.

Kill fees should also take into account your opportunity costs. In other words, but for your work on the “killed” project, you could have been working on other projects.

Scope of Work. Your contract must include a description of the specific deliverables you will provide and when. It must also state that the contract does not include any additional work beyond what is described in the contract.

How does this relate to getting paid? A scope of work provision not only ensures that a project won’t balloon out of control. It also ensures that when you present the deliverable you will get paid because that deliverable clearly conforms to the description of the scope of work.

Also, if you work on a flat rate, disputes relating to the scope of work can cause your effective rate — and profit — to deteriorate precipitously. BUT, if you have this provision in your contract, you won’t be forced to do additional work. Plus, if the client wants you to do additional work, then that work needs to be addressed in an additional contract with an additional fee.

Which leads us to…

Entire Agreement/Merger Clause. This is a clause that states that the parties’ entire agreement is contained within the signed contract. This isn’t an obvious “getting paid” provision either. But it’s critical.

With this provision, the entire agreement between the parties is contained within the contract. And the client can’t bring anything else into the contract.

For example, if you deliver the work product, and the client says, “I was expecting ______ based on the discussion we had on (date before you signed the contract),” or if you submit an invoice and the client says, “Wait, we agreed to (a price that isn’t identified in the contract),” you can point to the entire agreement/merger clause. And then you can point to the client’s checkbook and tell them to pay up.

Attorney’s Fees and Costs. Many times, the cost of taking legal action is a barrier to freelancers.

For example, if a client owes you $350.00 and refuses to pay, your legal costs will eat up most, and more likely all, of what the client owes you.

However, this provision will allow you to collect not only the $350.00, but your attorney’s fees and costs if you prevail. So, if a client doesn’t pay, you don’t have to worry about the cost of hiring an attorney, or even the filing fee for a small claims court matter (in which case you may be able to represent yourself).

And, just having this provision in your contracts can deter a client who may think about stiffing you.

So there you have it. Four essential provisions to include in your contracts to ensure that you get paid.

I almost forgot – one more thing. If the client doesn’t want to enter into a contract. Or balks at having any of these provisions in your contract, run away! Fast!

If I read one more article that says you “should” use written contracts, I’m going to lose it. I’ve also read articles stating that you must reach “an agreement” with a client prior to beginning work. What does that even mean? The bottom line is, if you want to get paid, you must use written contracts.

If you don’t have one in place you’re asking for problems if anything goes wrong with a project. Especially if that client that seemed so great turns out to be the client from hell.

It’s tempting to wing it, especially when you are just starting out. You need clients. You need to build your portfolio. Most of all, you need money. But you have to get everything in writing. In the long run you will make more money if you do.

I’ve seen the problems that a lack of written agreements can create. In fact, one of the first things I ask new clients is whether they have written agreements with their clients. If they don’t, we rectify that problem as soon as possible.

I learned this for myself. This is difficult for me to admit, but. . . I am a lawyer and I’ve made this mistake.

When I started my law practice, I took on new clients and (sometimes) wouldn’t have them sign an engagement letter right away. I was so excited to have a new client and work to do that I would dive right in. Even worse, I would not get a retainer. And now I use the Replenishing Retainer and the sky is bluer, and the stars are brighter at night.

As I tell my clients, spend a little money up front to get everything right, and you will save money if (or when) something goes wrong. So, always use written contracts, and make sure they specifically identify the parties’ duties, the payment terms (including your retainer) and include an attorney’s fee provision. This provision is essential if something goes wrong and you have to hire a lawyer. When you prevail, your (now) former client will have to pay you for the fees and costs you spent litigating the matter. That provision also acts as a deterrent to a client who may try to get out of paying you.

It can be difficult talking about contracts and money to a new client. But you’ll learn two things very quickly if you confidently and effectively, deal with the money issue up front. First, you will get paid (Yay!). Second, your client will respect you (Yay! again). And if the client doesn’t want to enter into a contract with you, then run. As fast as you can.

In conclusion, remember: no contract, no work. And use the Replenishing Retainer. Contract + Retainer = getting paid on time. How beautiful is that?

It can be tough though. Especially if you are just starting out and trying to build a business. You will be tempted to take anyone who walks through the door. But you have to be selective.

And, confession time, I still have issues with problem clients. Maybe my business slowed down and I became crippled with the irrational thought that no one else is going to walk through the door. Or I hit it off with a client in the beginning, but then things went bad.

No matter the reason, everyone has dealt with problem clients. But you have to get rid of them. As quickly as possible.

Heck, I’m a lawyer, and it’s really hard for lawyers to “fire” clients, especially if you’ve appeared in a case for them. But I do get rid of them. And when I do, I find that my income goes up, my stress goes down, and the world is a more beautiful place.

Also, I’m sure that the ability to pick and choose who you work with is one of the reasons that you started your own business. It was for me. So it’s no use working for problem clients.

Problem clients will make demands on your time and not want to compensate you for it. They will call you on holidays or after business hours when you are spending time with your family. You’ll do a great job for them and they’ll still find something to complain about. Usually with the intent to get you to reduce the rate you quoted them. They’ll also take months to pay your invoice, if they pay at all.

And, when you have to chase payment, you’re worse off than if you had never met that client. Sure, they may pay you some money, but you probably spent so much additional time trying to collect, that the money you’ve received isn’t worth the time and effort that you put into the work.

Plus, there are other clients — your ideal clients — that you could have been working with while you were dealing with the client from hell.

So how do you avoid clients like this?

First, trust your gut. Seriously. I’ve found that the clients that are the most hassle are the ones that I had a gut feeling about from the beginning.

But, there will be times when you think that the client is perfect for you, and then they turn out to be the worst. This doesn’t happen as frequently, but it does happen. And that’s where your contract comes in.

You need to have provisions in your contract that allow you to kill it if necessary. That way, if things start to go bad, you have an out.

You also need to have provisions in your contract that will assist you to collect any money that the client owes you. This includes a provision for attorneys’ fees and costs if you are forced to sue to get paid.

And you should never begin work without a Replenishing Retainer. With that retainer, the client can’t stiff you. Which means that you may not have to sue the client if the retainer will cover what they owe you.

So, what have we learned? Trust your gut and don’t get involved with a client in the first place. But if you do get involved with a problem client, make sure that you have provisions in your contract to allow you to kill it and recover attorneys’ fees and costs. And always get a retainer. Always.